Bernanke keeps flooding the money market

When the price of the US dollar is approaching zero, the Federal Reserve Chairman, Ben Bernanke reveals a bitter truth about the futility of monetary policy:

The U.S. economy “will probably remain weak for a time,” even if the credit crisis eases, Bernanke said yesterday in his speech. While the Fed can’t push interest rates below zero, “the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” he said.

Maybe eventually — after the Fed prolongs the recession and fuels malinvestments — more Americans will wake up to the fact that inflating the money supply is not about stimulating the economy nor about helping the public. It is all about giving new money to the banks first. In Canada, monetary inflation goes unnoticed or without debate.

Term Loan Facility (TLF) is a license to print money offered by the Bank Of Canada

Talk about incremental conservatism now seems very hilarious. I am getting fed up of this new socialism that is creeping in from the Conservative government. We are now in a recession and Jim Flaherty and the Bank Of Canada are throwing more money at the economy. This is a highly disturbing and desparate move to increase the money supply:

The Bank said it plans to introduce a Canadian Dollar Term Loan Facility (TLF) in four auctions of $2 billion each in the coming weeks.

Under the plan, qualifying financial institutions will be able to offer non-mortgage loans as collateral — meaning they can offer most loans currently on their books.

This will prolong the recession by feeding malinvestments. I do not like this socialist / crony-capitalist trend of our supposedly “conservative ” government. The real solution to financial woes is to let businesses fail.

Jim Flaherty offers more corporate welfare to the auto sector

It seems like Jim Flaherty is making a habit of pork-barrelling and corporate bail outs. The auto sector is most recently at the trough. Amid all of the nonsense that he spewed out this past weekend, we find a peculiar trend:

His top priority, however, is to ensure that banks are lending to each other, and that credit is available to corporate and household borrowers at a decent price. A well-functioning credit market, he said, will help the manufacturing sector as much as any kind of direct aid.

Getting the money first into the hands of the bankers seems to be the priority of our leaders.

Hat Tip to Briggs Armstrong for Yet Another GM Bailout which not only prescribes solutions but also has the courage to point to the irresponsibility and immorality of such bailouts.

Canadian Lenders Assurance Facility — more bank bailouts?

This Canadian Lenders Assurance Facility sounds like one more bailout in disguise. The government is backing loans that nobody else will insure. How is that possible? It is possible because the government can print money and extort taxes.

If what the minister says is true, why are we not seeing insurance companies from “around the world” taking on the risk of these insured mortgages which “provide a reliable backstop for Canadian mortgage-backed securities, which are well accepted around the world” instead of the government? The truth is that these securities are only accepted because the people around the world expect the government will bail them out — at any cost, I might add — when they fail. I say let them fail. The more bitter truth is that the insurance companies and the banks do not have any money to do so even if they wanted to — their money depends on constant inflation of the money supply.

This temporary program will be offered to lenders on commercial terms so there is no expected fiscal cost.

Why is he calling it temporary? It makes no sense to call this temporary when the mechanism and the reliability of these markets hinges on bailouts.
No expected fiscal cost? Yeah, the money will fall from the sky!

Many countries have recently announced new and comprehensive policy initiatives to restore or protect the stability of their financial systems. “I welcome the decisive and far-reaching actions that many countries are taking, which will provide critical support to financial stability,” said Minister Flaherty.

I beg your pardon, Mr. Minister? Countries around the world are just printing money, nationalizing their banks and now you are doing the same.

Ladies and gentleman, friends and neighbors, get ready to enjoy more socialism and price inflation in Canada.

Jim Flaherty announces mortgage bailouts

Jim Flaherty announces mortgage bailouts to the tune of $25Billion and none of this goes through parliament. That is a lot of money going to people who are not able to keep up with their payments.

This is nonsense:

Flaherty said the plan will make mortgages “more available and more affordable” for Canadians, adding that it will have “no fiscal cost to taxpayers.”

No fiscal cost to taxpayers?? Yeah, instead of screwing the taxpayer through open accounting-style taxes, the inflation of the money supply will screw the taxpayer through rising prices.

Who would have thunk it?

No Canadian bank bailouts but “make credit available” instead?

Speaking of Canadian banks, I think we may be getting a few mixed messages from the government. Jim Flaherty insists that the government will not bailout any banks and presents a muddied message that insists that credit must be made available:

“The government stands ready to take whatever actions are necessary to protect the stability of the Canadian financial system.”

“I think what we have right now is adequate.” But he would not give any details about what specific measures he was contemplating and dodged questions about expanding CMHC lending programs, except to say it is a possibility. Any new measures will target the availability of credit, and not aim at subsidizing banks for their losses, or even focus on the cost of credit.

“So what I’ve said to the banks is, do as much as possible in the present circumstances” Mr. Flaherty said. “My concern, again, is less the cost of credit – that is, the price – but the availability of credit. We have to ensure that credit continues to be available.”

I am happy to hear Stephen Harper reiterate that there will not be any bailout of Canadian banks. However, I am not satisfied when I hear this:

‘The government has a series of options at its disposal … to ensure both the availability of credit and the cost of credit coming down, and we’re doing that to ensure there’s money available,” he said.

How can the government make credit available? What are these secret options at the government’s disposal? They had better get their story together because Flaherty seems unconcerned about interest rates wheras Harper is. Maybe that was just a slip up.

Regardless, get ready for an inflation of the money supply.

There is nothing that the government does that is rightfully productive. The government is not some rich zillionaire who can hand out donations to “make credit available” as a goal. Anything the government does is funded by what the government takes away. When the government acts to “make credit available” to the economy, we find ourselves somewhere along a continuum between an independent monetary system and a banking system that requires bailouts to prevent collapse. Whatever makes a bailout wrong is the same thing that makes a policy to “make credit available” wrong too — just to a less dramatic degree.

The Sky is Falling – Canada’s Banks Rated Best in World

Following up on Shane’s recent post – clearly Layton and Dion want the economy to falter (or at least give them impression it is faltering), so they can rub Harper’s nose in it. Unfortunately for Dion and Layton, the economic forecast for Canadian banks is a lot better than they would leave everyone to believe:

Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

« Previous Page